How Will Filing Bankruptcy Affect My Credit?
Joshua A. Nesser • May 20, 2020
One of the biggest questions people have when they are thinking about filing bankruptcy is what affect the filing will have on their credit. While a bankruptcy will have a significant negative impact on your credit score, it does not mean that you will never again be able to open a credit card, rent an apartment, or even buy a car or a house.
Filing bankruptcy certainly will cause your credit score to drop, in some cases by 100 to 200 points. The size of the decrease depends on the type of bankruptcy you file, the amount of debt discharged in your bankruptcy, and the type of bankruptcy you file. However, it is worth keeping in mind that in many cases, not filing bankruptcy and allowing your debts to go longer and longer past due will have just as much of an impact, if not a greater one.
A Chapter 7 bankruptcy, in which most if not all of your debts will be discharged, has the most severe impact, as it causes lenders to see you as a high credit risk. Most people who file Chapter 7 bankruptcy will have to wait at least two to four years after the bankruptcy is discharged before they can qualify for a mortgage. On the other hand, because your debts are restructured and actually repaid in a Chapter 13 bankruptcy, this is not so much of a red flag to creditors and will have a lesser impact on your credit score. Lenders generally require that one to two years pass from the date a Chapter 13 bankruptcy is discharged before a borrower can qualify for a mortgage.
Creditors will be aware of a bankruptcy filing for a number of years even after the bankruptcy is discharged. A Chapter 7 bankruptcy can remain on your credit report for up to 10 years, while a Chapter 13 filing will drop off the report after 7 years. However, the negative impact of a bankruptcy on your credit will lessen over time, even while it is still on your credit report. This is especially the case if following your bankruptcy, you implement good credit habits, meaning that you establish new credit within your financial means and pay your bills on time. It is also a good idea to monitor your credit to ensure the information being reported to the major credit bureaus is accurate. By taking these steps, you can begin rebuilding your credit score and eventually mitigate the impact of the bankruptcy filing from your credit history.
If you are thinking about filing bankruptcy and have questions about the potential impact on your credit, please do not hesitate to call our office. Our office has been successful in helping consumers with collection problems for over 28 years. If you have a debt or tax problem please contact me at (847) 705-7555 or jnesser@lavellelaw.com
and find out how we can help you. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
More News & Resources
Lavelle Law News and Events
Lavelle Law represented a joint venture in its $9.9 million acquisition of four multi-unit buildings.
A Type F reorganization (“F Reorg”), governed by Section 368(a)(1)(F) of the Internal Revenue Code, provides a strategically significant mechanism for corporate restructuring. Defined as a “mere change in identity, form, or place of organization of one corporation,” an F Reorg permits a corporation to alter its legal existence while being treated for federal tax purposes as the same entity. This recharacterization allows for the uninterrupted preservation of tax attributes while maintaining shareholder continuity.
When it comes to estate planning, most people think about providing for their loved ones—but what about the furry, feathered, or scaled members of your family? In the United States, 68% of households own at least one pet, according to the American Pet Products Association’s 2023-2024 National Pet Owners Survey. For many, pets are more than just companions—they’re family. Ensuring their care after your death or incapacity is a vital part of comprehensive estate planning. In Illinois, a Pet Trust offers a powerful solution to guarantee your pet’s well-being long after you’re gone.
IRS Press Release Addresses Payment Plan Options - A recent press release by the IRS addressed the options that are available to taxpayers who may owe more on April 15th than they can pay. The IRS advised taxpayers that they do not need to wait until April 15 to file their 2024 federal return, and if they owe and are unable to pay the balance in full, there are payment plans available to help them pay their tax obligation.
Join us on May 21 in Schaumburg for an engaging Breakfast Briefs seminar, delving into vital strategies to fortify your business. This session will explore the critical role of crafting ironclad non-compete agreements, shielding your trade secrets, and mastering the nuances of temporary restraining orders (TROs) and injunctive relief. Our presenters, attorneys Matthew Sheahin and Jennifer Tee, bring a wealth of experience in this legal domain. Seize this chance to bolster your company’s legal protections and lay a solid groundwork for enduring success!
On March 21, 2025, the Financial Crimes Enforcement Network (FinCEN) issued its interim final rule stating that those entities previously classified as "domestic reporting companies" are now exempt from all BOI reporting requirements. On the other hand, all foreign entities registered to do business in the USA must file their own initial BOI reports within 30 days of the initial final rule's publication, if they have not done so already.
Spring is here, and with baseball season kicking off, we’re stepping up to the plate with our annual Lavelle Law Business After Hours event. We’re excited to partner with our friends in the Schaumburg business community for an evening of networking, good vibes, and a few surprises—all hosted in the friendly confines of our Schaumburg office. Bonus points: Feel free to rock your favorite baseball team’s gear and show off your fandom while you’re at it!
Delaware corporations seeking to redomesticate to another state should be advised that on February 4, 2025, the Delaware Supreme Court issued its highly anticipated decision in Palkon v. Maffei, C.A. No. 2023-0449-JTL, addressing a challenge to TripAdvisor's redomestication from a Delaware corporation to a Nevada corporation. The case raised important questions regarding the standard of review applicable to such reincorporations, particularly when fiduciaries may derive a benefit from shifting to a legal regime perceived as more friendly.
Recent legislative efforts in Illinois are reshaping the state’s approach to residential zoning, with significant implications for the housing market. A new bill, House Bill 1814, introduced last week, aims to eliminate single-family zoning in municipalities across Illinois. If passed, this bill will allow for the development of multi-unit buildings in areas currently zoned exclusively for single-family homes. This initiative, alongside a similar bill introduced last year, has the potential to address the state’s growing housing shortage and make housing more affordable for middle-class families.
On February 27, 2025, FinCEN issued an immediate press release stating it would not impose fines, penalties, or take any other enforcement actions against companies that fail to file or update Beneficial Ownership Information ("BOI") reports pursuant to the Corporate Transparency Act ("CTA") by the current deadlines. FinCEN also announced that it would be revising BOI reporting deadlines through an interim final rule set to be issued no later than March 21, 2025.
